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Friday, June 11, 2010

The business of love

It seems so romantic. Boy meets girl, they are young and fall in love, and they decide to get married. They figure this will be forever, after all, neither one could ever love anyone else, right? Never mind that she has $5 million and he has $500. They both proclaim that "The money doesn’t matter."

In a previous era that couple would tie the knot and hopefully live happily forever. In today’s "lawyered up" world, after the couple decides under a beautiful Arizona moon that they are in love, it is time to start the car and head for each person’s lawyer to get financial arrangements made in the form of a prenuptial agreement.

In the case of a couple with no significant assets, a prenup usually isn’t necessary. If they break up they can split the gas station free dishes, the Denny’s gift certificate, or whatever else they have of little value. In a prenup, both parties have a lawyer at about $2,000 each which means the legal costs would probably be more than the value of their assets.

What about if there are a LOT of assets, especially when most of them come from one party? About 40% of marriages fail so doesn’t it make sense to plan for such a contingency? To me the answer is yes and no. I’m still a romantic in the sense that when I fell in love with my future wife, the last thing on my mind was how we would split the estate if we got divorced. Of course, when your estate is about $800 as ours was, such things aren’t a factor. On the other hand, if I had $5 million, I might have wanted a legal document proclaiming how it would be split. However, in 1967 such things weren’t really considered.

Because of the cost of lawyers and the lack of assets of most young couples, most prenups involve baby boomers in the 40 to 60 age group who have had time to accumulate assets. They total 3% to 5% of total married couples.

In spite of their growing popularity, a prenup can still cause disharmony between a couple with responses like "You don’t love me!" One adviser says that both partners need to realize that it is only a piece of paper and is a "routine part of the business of getting married." The BUSINESS of getting married? Gee, doesn’t that sound romantic?

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